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Raymond James Q3 Earnings Down But Retail FA Recruiting A Bright Spot

Raymond James Financial posted improved earnings in its fiscal third quarter compared to the second quarter, but results were ugly when compared to last year’s third quarter, which represented a record across all business segments, including the bank and the private client group. Meanwhile, the retail division enjoyed robust recruiting numbers year-to-date. The number of financial advisors grew by nearly 8.5 percent in the June quarter compared to last year; client assets are down year-over-year, but grew by 7.5 percent compared to the preceding quarter, ended March 31.

Raymond James Financial posted improved earnings in its fiscal third quarter compared to the second quarter, but results were ugly when compared to last year’s third quarter, which represented a record across all business segments, including the bank and the private client group. Meanwhile, the retail division enjoyed robust recruiting numbers year-to-date. The number of financial advisors grew by nearly 8.5 percent in the June quarter compared to last year; client assets are down year-over-year, but grew by 7.5 percent compared to the preceding quarter, ended March 31.

Raymond James is experiencing a rush of interest from apparently disgruntled wirehouse advisors. Advisors can affiliate as “independent contractor advisors” with Raymond James Financial Services, or as employee reps with Raymond James & Associates. Since the beginning of the fiscal year, RJA has recruited over 200 advisors worldwide. (RJ has offices in Canada and the U.K.) As of June 30, there were 1,290 “employee” advisors; recruiting is up 82 percent from the wirehouse channel compared to a year ago. There were 3,220 independent-contractor advisors; that channel is experiencing an influx of interest from wirehouse FAs, with new FAs from wirehouse firms up by 416 percent compared to a year ago.

Chet Helck, COO of the parent company Raymond James Financial, says the b/d has been seeing strong interest in both platforms, mostly from reps from the larger firms, especially since he says Raymond James hasn’t had a lot of the problems the other firms have. Helck says Raymond James has maintained a stable public image, and it didn’t take TARP money or was forced into a massive reorganization. “There is no question that other firm’s problems have accelerated our success, but it was already well underway before their problems began. So this is just a bonus for us really,” Helck says.

CEO Tom James said in a company statement about the company’s overall performance, “As we have continued to add producing personnel of all types aggressively, we are poised to participate in the recovery as it occurs.”

Has an economic recovery started? Compared to its second quarter, the third quarter would indicate something of a turnaround. The stock market rally that started in March helped fuel an increase of profits compared to the prior quarter, ended on March 31.Shareholder equity and book value also climbed year-over-year. But compared to last year, fiscal 2009 is ugly indeed. Gross revenues were down 22 percent compared to last year; net income in Q3 is down by 39 percent from the prior year’s quarter.

Raymond James Bank returned to profitability in spite of setting aside $29.8 million in loan loss provisions; the allowance for loan losses as a percentage of total loans increased to 1.9 percent from 1.84 percent in the quarter.

The retail division, which contributes the bulk of the firm’s revenue, also had ugly comparisons. Revenues dropped 24 percent on the private-client side (to $370 million from $485 million), and pre-tax income was down 48 percent (to $18.3 million) in the same period. Assets at the firm are down 8 percent (to $196 billion from $212 billion) compared to the third quarter of 2008. Since roughly 50 percent of assets at Raymond James are fee-based, part of the decrease in revenue was due to market-related losses. However, Helck says asset losses were offset by strong recruiting. Helck says year-to-date, RJF have had net positive new accounts transferring in at a rate of three new accounts for every one transferred out.